The European Court of Justice has handed down its decision in the Woolworths and Ethel Austin cases. The decision is that:
Where an undertaking comprises several entities, the term ‘establishment’ in the directive on collective redundancies must be interpreted as referring to the entity to which the workers made redundant are assigned to carry out their duties
The term “establishment” is relevant to the legal requirement to collectively consult where an employer is proposing to dismiss as redundant 20 or more employees with a period of 90 days or less. If the obligation to collectively consult is triggered this means that minimum consultation periods will apply and that dismissals may not take effect before the expiry of the relevant period. Another important consequence of the collective consultation rules applying is that if they are breached the employer will face a sanction of the “protective award” of up to 90 days gross actual pay for each affected employee.
The ECJ ruling clarifies that when establishing the headcount of proposed redundancy dismissals this headcount must be at a single “establishment” which means individual workplace (the entity to which the workers made redundant are assigned to carry out their duties) rather than the employer’s headcount as a whole. Essentially narrowing the circumstances in which the obligation to collectively consult will apply.
The background to this recent ruling is that the EAT had decided in 2013 that the term “establishment” should be given the wider meaning and apply to employer headcount as a whole (drawing more redundancy situations into collective consultations). The ECJ has therefore referred the case back to the Court of Appeal which will likely result in the EAT decision being reversed.
Employers will see this as good news due to the fact that it clearly narrows the scope for collective consultation obligations to apply. However, it does mean a return to uncertainty as defining the entity to which the workers are assigned to carry out their duties is not necessarily straight-forward. We will have to await the decision of the Court of Appeal and hope for some clarity.
